Air Canada gets CAW backing on pension request

The Canadian Auto Workers union said on Thursday it would back Air Canada’s request to the Canadian government for further relief on funding its deep pension deficit, becoming the final union at the airline to give its blessing to the proposal.

Bob Orr, assistant to national CAW President Ken Lewenza, said the union had little choice but to support money-losing Air Canada’s request to extend a cap on its past service pension payments for another 10 years from 2014.

With the pension payment being due in 2014, no one is under the illusion that Air Canada would have the money to make that payment

“With the pension payment being due in 2014, no one is under the illusion that Air Canada would have the money to make that payment,” Orr said in an interview.

“We didn’t want to get into a whole round of discussions around other cost-savings measures they would need in order to make the payment,” he said.

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Air Canada’s pension deficit stood at $4.2-billion as of Jan. 1, largely because of extraordinarily low interest rates, and analysts say funding the plan under normal rules could threaten the airline’s existence.

Finance Minister Jim Flaherty has said he would only consider granting the extension if the airline, Canada’s largest, had the support of current unionized workers and pensioners – representing 27,000 employees and 25,000 retirees.

He also wants Canada’s financial regulator, the Office of the Superintendent for Financial Institutions, to agree to the extension although OSFI has no formal regulatory power in the funding relief decision.

In 2009, Air Canada won agreement from the government for a moratorium on making any special payments to reduce its defined-benefit pension deficit through 2010, and then a cap on special payments that would rise from $150-million in 2011 to $225-million in 2013.

Orr said Air Canada was approaching OSFI to “pay $150-million into the plan” each year until 2024.

Air Canada did not immediately respond to a request for comment.

The agreement is due to expire in Jan. 30, 2014, and Air Canada is pressing Ottawa to extend the cap another decade.

Two of Air Canada’s unions supported the request as a condition of their arbitrated settlements, and two others have also agreed.

CAW Local 2002 represents 3,800 customer service and sales agents across Canada at Air Canada.

In exchange for the CAW’s support of the pension proposal, Air Canada has offered to extend a deadline to implement new pension rules for employees by one year to Jan. 1, 2014.